Accountingformanagers 141208013206 Conversion Gate01

7/24/2019 Accountingformanagers 141208013206 Conversion Gate01

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ACCOUNTINGFOR MANAGERSFor 5 Semester,NED University


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Outline of the Course

Unit I ! Fin"n#i"l A##ountin$Unit II ! De%re#i"tion A##ountin$ & R"tio An"lysis

Unit III ! Fun' Flo( "n' C"sh Flo( An"lysisUnit I) ! M"r$in"l Costin$Unit ) ! Cost A##ountin$

*ro+lems vs Theory ! -./ 0.


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Concept ofAccounting A##ountin$ is " %ro#ess of I'entifyin$,

Me"surin$, Cl"ssifyin$, Re#or'in$ "n'#ommuni#"tin$ Fin"n#i"l Inform"tion

1oo2 3ee%in$

is the "rt of

re#or'in$

+usiness

tr"ns"#tionsin "

system"ti#

m"nner

Element Des#ri%tion

I'entifyin$ Determinin$ +usiness tr"ns"#tion

Me"surin$ E4%ressin$ +usiness tr"ns"#tionin terms of money

Re#or'in$ Enterin$ money tr"ns"#tions in+oo2s

Cl"ssifyin$ Grou%in$ of entries "##or'in$ ton"ture

Summ"riin$

*resent"tion of "##ountin$inform"tion

Communi#"tin$

Inter%ret"tion of results


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Tr"ns"#tion)sEvent

C"%it"l intro'u#e' +y %ro%rietor in +usiness

Amount (ith'r"(n +y %ro%rietor for%erson"l use

A%%ointe' " s"lesm"n for +usiness

*riv"te in#ome e"rne' "n' ret"ine' +y the%ro%rietor (ith himself

*romise to $ive lo"n to " frien' Re#eive' $ift from mother6in6l"(

*ur#h"se return

Dis#ount "llo(e' to " #ustomer

An e4%ense in#urre', +ut not %"i' S"le of $oo' on #re'it

7oss of $oo's +y theft

8h"t is the

'i9eren#e:

Every ;n"n#i"l

#h"n$e th"t o##urs

in your +usiness is

" tr"ns"#tion

Event is not

me"sur"+le interms of money,

+ut tr"ns"#tion is

me"sur"+le in

terms of money


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Users ofAccounting

Information

O(ners or Sh"rehol'ers

*otenti"l investors

7en'ers

Cre'itors

Customers

Cre'itors

M"n"$ement

Em%loyees

Government

Sto#2 e4#h"n$es

The v"rious %"rties

(ho "re intereste'

in "##ountin$

inform"tion

Nee' "n' Im%ort"n#e of A##ountin$

Results of o%er"tions

Solven#y "n' li


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Ty%es oftr"ns"#tions

> C"sh Tr"ns"#tions

? Cre'it tr"ns"#tion

@ 1"rter tr"ns"#tion0 *"%er tr"ns"#tion

Criteri"/ Settlement

"n' Time

> Antony #ommen#e' +usiness (ith #"sh?Too2 lo"n from " +"n2

@ S"l"ries yet to %"i' to em%loyees

0 Returne' $oo's to su%%lier Mr A2+"r

5 C"sh stone from o#e

- S"le of $oo's on #re'it to Mr Am"rB 8ith're( from +"n2 "##ount for %erson"l use

Sol' $oo's to em%loyee in settlement of his s"l"ry

Test your *ro$ress:


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1"si#A##ountin$

Terms

1usiness Entity

*ro%rietor or O(ner

E


8/52

> A##ountin$ Con#e%ts? A##ountin$ Convention

1usiness Entity Con#e%t

1usiness "n' o(ner "re se%"r"te entities

A##ountin$ vie(

C"%it"l "n' 'r"(in$s

A##ur"te ;n"n#i"l %osition

A##ountin$ *rin#i%lesA $ener"l l"( or rule "'o%te' or %rofesse' "s

" $ui'e to "#tion " settle' $roun' on +"sis of#on'u#t on %r"#ti#e

Money Me"surement Con#e%t

Re#or's only monet"ry tr"ns"#tions

el%s to 2no( the v"lue of +usiness

A##ountin$ Con#e%tsThese #on#e%ts%rovi'e "foun'"tion for"##ountin$%ro#ess Noenter%rise #"n%re%"re its;n"n#i"l

st"tements (ithout#onsi'erin$ these#on#e%ts

AccountingConcepts


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A##ountin$Con#e%ts

Goin$ Con#ern Con#e%t

*erm"nent #ontinuity

*re%"r"tion of Fin"n#i"l st"tements

Distin#tion +et(een #"%it"l "n' revenue items

Enterin$ into lon$ term #ontr"#ts

Cl"ssi;#"tion of "ssets

A##ountin$ %erio' #on#e%t

3no(in$ the %erform"n#e of +usiness

Convenient short %erio's

C"len'"r %erio' "n' ;n"n#i"l %erio'

Cost or istori#"l Con#e%t

Fi4e' "ssets "t #ost

Current "ssets "t #ost %ri#e or m"r2et %ri#e (hi#h ever is less

)"lu"tion of ;4e' "ssets every ye"r +e#omes 'i#ult

A##ountin$

#onvention refers

to #ustom

tr"'ition or

%r"#ti#e, (hi#h

h"s +een in

%r"#ti#e for " lon$

time, (hi#h

+e#omes the

+"sis of %re%"rin$

;n"n#i"l

st"tements


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A##ountin$Con#e%ts "n'Convention

O+He#tive Evi'en#e Con#e%t

Entries +"se' on sour#e 'o#uments

Re'u#es s#o%e of m"ni%ul"tions

Revenue re#o$nition #on#e%t

Revenue is e"rne' from s"le of $oo's

Goo's or servi#es "re tr"nsferre' (hen le$"lly li"+le to %"y

No unre"lie' %ro;ts

*revents in="te' %ro;ts

Gives o+He#tivity

A##ru"l Con#e%t

Tr"ns"#tions "re re#or'e' (hether they "re settle' in #"shor not

Outst"n'in$, *re%"i', A##rue', In#omes re#eive' in "'v"n#e

Du"l As%e#t #on#e%t A##ountin$ E


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A##ountin$ Con#e%ts A##ountin$ #onvention refers to #ustom tr"'ition or %r"#ti#e, (hi#h h"s +een in %r"#ti#e for "

lon$ time, (hi#h +e#omes the +"sis of %re%"rin$ ;n"n#i"l st"tements

A##ountin$ Con#e%t Des#ri%tion

Goin$ Con#ernCon#e%t

1usiness unit (ill h"ve " %er%etu"l e4isten#e "n' (ill not +esol' or li


12/52

AccountingConvention

s

A##ountin$

#onvention refers

to #ustom

tr"'ition or

%r"#ti#e, (hi#h

h"s +een in

%r"#ti#e for " lon$

time, (hi#h

+e#omes the

+"sis of %re%"rin$

;n"n#i"l

st"tements

Convention of M"teri"lity

A##or'in$ to Ameri#"n A##ountin$ Asso#i"tion, An itemshoul' +e re$"r'e' "s m"teri"l if there is re"son to +elieveth"t 2no(le'$e of it (oul' in=uen#e 'e#ision of informe'

investor

Convention of Conserv"tism

All "nti#i%"te' losses shoul' +e re#or'e' +ut "ll "nti#i%"te'$"ins shoul' +e i$nore'

It is " %oli#y of %l"yin$ s"fe

Convention of #onsisten#y

A##ountin$ metho' shoul' rem"in #onsistent ye"r +y ye"r This f"#ilit"tes #om%"rison in +oth 'ire#tions ie intr" ;rm

& inter ;rm

Convention of Full 'is#losure

Inform"tion rel"tin$ to the e#onomi# "9"irs of the

enter%rise shoul' +e #om%letely 'is#lose' (hi#h "re ofm"teri"l interest to the users

*roform" & #ontents of +"l"n#e sheet & *&7 "# "re

%res#ri+e' +y Com%"nies A#t

It 'oes not me"n th"t le"2in$ out the se#rets of the+usiness


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ACCOUNTING EUI)A7ENCE

Assets = Owners Equity +

Outside Liabilities

A = OE + OL


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14

DEFINITION/ 1S1"l"n#e Sheet is 'e;ne' "s

" st"tement of the ;n"n#i"l

%ositionof "n enter%rise"s "t " $iven '"te, (hi#h e4hi+its

"ssets, li"+ilities, #"%it"l, et#


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ORIPONTA7 FORM OF 1S

LIABILITIES

Amount

(Rs) ASSETS

Amount

(Rs)

Capital XXFixed Assets-Land,ld!,

XX

L"an ta#en XX Current Assets

Current Liabilities Cas$ % an# %s XX

Outstandin! Expenses XX A&&"unts 'e&ei(able

)*ebt"rsXX

an# O(erdrat XX ills 'e&ei(able XX

A&&"unts ayable)Credit"rs

XX .n(ent"ries )/t" XX

X0 X0


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)ERTICA7 FORM OF 1S/O2'CE/ OF F23*/ A"unt )'s5 py A"unt )'s &y

/$are Capital AA XX

'eser(es 6 /urplus AA

/e&ured L"ans AA XX

2nse&ured L"ans AA XX

AC X0

AL.CA7.O3 OF F23*/ A"unt )'s5 py A"unt )'s &y

Fixed Assets 8r"ss l"

- *epre&iati"nAA XX

.n(estent AA XX

Current Assets 9 Current Liabilities AA XX

L"ans 6 Ad(an&es AA XX

:is&ellane"us Expenditure AA XX

AC X0


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1;

A J OE K O7Assets are properties or economic

resources owned by a business. They areexpected to provide future benefits to the

business.

Assets are properties or economic

resources owned by a business. They areexpected to provide future benefits to the

business.

Liabilities are

obligations of the

business. They

are claims

against the

assets of the

business.

Liabilities are

obligations of thebusiness. They

are claims

against the

assets of the

business.

Equity is the

owners claim on

the assets of the

business. It is the

residual interest in

the assets after

deducting

liabilities.

Equity is the

owners claim on

the assets of the

business. It is theresidual interest in

the assets after

deducting

liabilities.

A OE+OL


18/52

1

The accounts involved are:

(1) Cash (asset)

(2) Owners !"uit# (e"uit#)

wners of !cox "ompany contributedRs3 #$%$$$ cash to start the business.

*ROOF/ A J OE K O7


21/52

1

wners of !cox "ompany contributed&s. #$%$$$ cash to start the business.

Tr"ns"#tion An"lysis

Assets ' Liabilities (

wners)

Equity

"ash !upplies Equipment

Accounts

*ayable

+otes

*ayable

wners)

"apital

,- #$$$$ #$$$$

#$$$$ $ $ $ $ #$$$$

#$$$$ ' #$$$$


22/52

Theaccounts involved are:

(1) Cash (asset)

(2) $upplies (asset)


*urchased supplies paying &s. -%$$$ cash.


23/52

?


*urchased supplies paying &s. -%$$$cash.


wners)

Equity

"ash !upplies EquipmentAccounts*ayable

+otes*ayable

wner)s)"apital

,- #$$$$ #$$$$

,# /-$$$ -$$$

-0$$$ -$$$ $ $ $ #$$$$

#$$$$ ' #$$$$


24/52

4

The accounts involved are:

(1) Cash (asset)

(2) !"uipment (asset)


*urchased equipment for &s.-1%$$$cash.


25/52

@


*urchased equipment for &s. -1%$$$cash.


wners)

Equity


Accounts

*ayable

+otes

*ayable

wners)

"apital

,-. #$$$$ #$$$$

,#. /-$$$ -$$$

,2. /-1$$$ -1$$$

3$$$ -$$$ -1$$$ $ $ #$$$$

#$$$$ ' #$$$$


26/52

The "##ounts involve' "re/

> Su%%lies "sset

? E


27/52

;

*urchased !upplies of &s. #$$ andEquipment of &s. -%$$$ on account.



wners)

Equity


Accounts

*ayable

+otes

*ayable

wners)

"apital

,-. #$$$$ #$$$$

,#. /-$$$ -$$$

,2. /-1$$$ -1$$$

,3. #$$ -$$$ -#$$3$$$ -#$$ -4$$$ -#$$ $ #$$$$

#-#$$ ' #-#$$


28/52

C"sh "sset

? Notes %"y"+le li"+ility


5orrowed &s. 3%$$$ from !5I


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?4

5orrowed &s. 3%$$$ from !5I



wner)s

Equity


Accounts

payable

+otes

*ayable

wner)s

capital

5al. 3$$$ -#$$ -4$$$ -#$$ #$$$$

,1 2$$$ 2$$$

,4 /8$$ /8$$

,7 3$$$ 3$$$

-$#$$ -#$$ -4$$$ -#$$ 3$$$ ###$$

#73$$ ' #73$$


35/52

?@

Fin"n#i"l St"tements*re%"re the Fin"n#i"l St"tements re=e#tin$ the tr"ns"#tions

(e h"ve re#or'e'


36/52

?

!coxs net

income is thedifference

between

&evenues and

Expenses.

The net income

of &s. #%#$$increases

!coxs equity

by &s. #%#$$.

In#ome St"tement

&evenues9

"onsulting revenue 2$$$

Expenses9

!alaries expense 8$$

+et income ##$$

!cox "ompany

Income !tatement

:or ;onth Ended ;arch 2-% #$$-

wners) equity% -st April #$$$ $

*lus9 Investment by owners #$$$$

+et income ##$$

wners) equity% 2-st ;arch #$$ ###$$

!cox "ompany

!tatement of "hanges in wners) Equity



37/52

?;

1"l"n#e Sheet

The balance sheet reflects

!coxs financial position at;arch 2- #$$-

The balance sheet reflects

!coxs financial position at;arch 2- #$$-

Accounts payable -#$$ "ash -$#$$

+otes payable 3$$$ !upplies -#$$

Total liabilities 1#$$ Equipment -4$$$

wners) equity ###$$

Total liabilities

and owners)

equity #73$$ Total asset #73$$

AssetsLiabilities < wners) Equity

!cox "ompany

5alance !heet;arch 2-% #$$-

wners) equity $

Investment by owners #$$$$

+et income ##$$

wners) equity% ;arch 2- #$$- ###$$

!cox "ompany

!tatement of "hanges in wners) Equity



38/52

Cl"ssi;#"tion of A##ounts

>En$lish A%%ro"#h

?Ameri#"n A%%ro"#h


39/52

En$lishA%%ro"#h

Every 1usiness

#on#ern 'e"ls (ith

other %ersons

A +usiness #on#ern

h"s #ert"in

%ro%erties or "ssets

It m"y in#ur #ert"in

e4%enses "n' m"y

e"rn #ert"in

in#omes


40/52

%ersonalAccounts

N"tur"l %erson"l "##ount

A##ounts of %hysi#"l "n' n"tur"lly +orn %erson

Arti;#i"l %erson"l "##ount

A %erson #re"te' +y l"(

Re%resent"tive %erson"l "##ount

They re%resent #ert"in %erson +ehin' them

*ersons (ith (hom

" +usiness is

#"rrie' out


41/52

AssetA##ount

An "##ount of

thin$s o(ne' +y "

#on#ern "n' in "n'

(ith (hi#h the

+usiness is #"rrie'

on

A##ounts of T"n$i+le "ssets

*hysi#"l evi'en#e

A##ounts of Int"n$i+le "ssets

Do of h"ve %hysi#"l e4isten#e

Nomin"lA##ount

A##ount of in#omes "n' losses "n' e4%enses

"n' $"ins


42/52

A#tivity

Test your *ro$ress

Furniture "##ount

Outst"n'in$ ("$es "##ount

St"tion"ry "##ount

C"%it"l A##ount

S"l"ries "##ount

N"tion"l Tr"'in$ Co "##ount

*re%"i' insur"n#e "##ount

Interest "##ount

S"les "##ount

Re%"ir on m"#hinery

De+tors "##ount

1ills re#eiv"+le "##ount

*rovision for 'e%re#i"tion

Rent "##ount

Asset orNomin"l "#

Nomin"l"#

Re%resent"tive%erson"l "#

N"tur"l %erson"l"##ount "#

Nomin"l "##ount"#

Arti;#i"l %erson"l"##ount "#

Re%resent"tive%erson"l "#

Nomin"l "##ount"#

Asset "#

Nomin"l "##ount"#

*erson"l"##ount "#

Asset"#Asset"#

Nomin"l"#


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4?

DOU17E ENTRQ SQSTEM

A ' E ( L

In the double/entry accounting system%

every transaction is recorded by equal

amounts of debits and credits.

In the double/entry accounting system%every transaction is recorded by equal

amounts of debits and credits.

=ebit ' "redit


44/52


45/52

RU7ES OF

DOU17E ENTRQSQSTEM


46/52

&eal Account Rules of A##ountin$/

De+it (h"t #omes in

Cre'it (h"t $oes out

These "re "sset

"##ounts th"t"%%e"r in the

1"l"n#e Sheet

They "re referre' to

"s Re"l A##ount or

*erm"nent

A##ounts "s these

"re o(ne' +y+usinesses "n' the

+"l"n#es in these

"##ounts "t the en'

of "n "##ountin$

%erio' (ill +e

#"rrie' over to the

ne4t %erio'

E4/ C"sh A##ount,

7"n' A##ount,

1uil'in$ A##ount

et#


47/52

%!&$O'A Account

Rules of A##ountin$/

De+it the Re#eiver

Cre'it the Giver

These "re "##ounts

of %"rties (ith

(hom the +usiness

is " #"rrie' on


48/52

'ominal Account

Rules of A##ountin$/

De+it "ll e4%enses "n'losses

Cre'it "ll in#ome "n'

$"insThese "re "##ounts

of e4%enses "n'

losses (hi#h "

+usiness in#urs "n'

in#ome & $"ins

(hi#h " +usiness

e"rn in the #ourse

of +usiness E4/

Rent A##ount,

Interest A##ount


49/52

A#tivity

Mr AH"y st"rte' +usiness (ith C"sh Rs >..,... Test your %ro$ress

T(o "##ountsInvolve'

Ty%es of"##ounts

Rule of De+it "n'Cre'it

A##ount to'e+ite'

A##ount to +e#re'ite'

C"sh "#C"%it"l "#

Re"l "#*erson"l "#

De+it (h"t #omesinCre'it $iver of+ene;t

C"sh C"%it"l

1rou$ht Goo's from )iH"y for C"sh Rs >...


Ty%es of"##ounts


A##ount to'e+ite'


C"sh "#Goo's%ur#h"se' "#

Re"l "#Re"l "#

Cre'it (h"t $oesoutDe+it (h"t #omesin

Goo's%ur#h"se'

C"sh

*ur#h"se' Goo's from SuH"y for #re'it Rs @..


Ty%es of"##ounts


A##ount to'e+ite'


R"$hu "#Goo's%ur#h"se' "#

*erson"l "#Re"l "# Cre'it $iver of+ene;tDe+it (h"t #omesin

Goo's%ur#h"se' R"$hu


50/52

@>

ACCOUNTING CQC7E

> 1usiness Tr"ns"#tion

?Tr"ns"#tion is re#or'e' in 'o#ument

)ou#her Re#ei%t@ An"lye the tr"ns"#tion

0ourn"l Entry

5 7e'$er A##ounts or T "##ount

-Tri"l 1"l"n#eB 1"l"n#e Sheet, *&7 A#, C"sh Flo(

St"tement


51/52

@1

5alance !heet

* < L A@c

"ash :low

*repare a trial

balance

*ost to the

ledgerournal Entry

!ource

documentsTransaction

AnalyBe

ACCOUNTANTS ROUTINE


52/52

7$an# 0"u +ow% was that debits tothe left or credits to the

leftC

I sure wish I had paidmore attention in classD

Documents

Accountingformanagers 141208013206 Conversion Gate01